Gulf Coast Residential Real Estate to Take a Hit
- Aug 03, 2010
Dees Stribling, Contributing Editor
Santa Ana, Calif.–According to CoreLogic, the impact of the BP DeepWater Horizon oil spill on residential values in coastal counties along the Gulf of Mexico is expected to range from $648 million over one year to as much as $3 billion over five years. If the (now unlikely) worst-case scenario occurs, and the spill reaches around the Florida Keys and up the Atlantic coast of Florida impacting beach amenities there, the additional losses could reach up to $28 billion over five years.
The analysis relies on estimating environmental amenity values that take into account the annualized economic value of beach access in the coastal communities at risk of being damaged by oil coming ashore, and beaches being closed to recreational use for a period of five years. Buyers of residential properties in these coastal communities (both single- and multifamily) paid premiums when they purchased their homes, for access to the beaches and the amenity benefits that they represent.
According to CoreLogic, there are 15 major counties stretching from the Gulf coast of Mississippi to the Atlantic coast of Florida with more than 600,000 residential properties within 1,000 meters of the coastline. In the coastal counties of Harrison (Miss.), Mobile (Ala.), and Escambia (Fla.), which are especially at risk, there are more than 71,000 residential properties that will potentially be impacted.
CoreLogic used its public record and parcel data collected in the 15 at-risk counties and combined that with proprietary geospatial coastline data that accurately identifies the geographic location of the shore. The approach for the valuation of environmental amenities was developed in the late 1970s and early ’80s and is a technique for measuring the value that consumers place on a variety of environmental and residential amenities.
TheCoreLogic analysis posits that the loss in amenity value increases for properties closer to the beach. Beachfront homes could incur a loss of amenity valued as high as $80,000. The highest-risk 71,000 residential properties in Mississippi, Alabama and Florida might lose beach amenities valued between $40,000 and $56,000 each.
Among the immediately impacted communities, the largest overall loss in amenity value would be in Pensacola ($1.6 billion), followed by Gulfport ($1.2 billion). In terms of average loss in amenity value per property, Gulfport ($56,000) is the largest, followed by Mobile ($45,000) and Pensacola ($40,000). If the Gulf currents take the oil to the communities along the Florida Gulf coast, the loss in amenity value will rise substantially. The four coastal communities along the coast (Panama City, Tampa Bay, Cape Coral, Naples) could experience a total loss in amenity value of $11 billion, impacting 238,000 properties.
Even though the chances are low, CoreLogic also estimated the loss in amenity value for communities along the Atlantic coast of Florida as well. This includes Miami, Key West, Palm Bay, Daytona Beach, and Jacksonville. More than 295,000 properties within 1,000 meters of the beach could be affected, with a total loss in amenity value of $13.5 billion.